I. Field of the Invention
The present invention generally relates to methods and systems for generating dynamic values for non-monetary reward currency that has varying values depending upon the type of goods and services for which the non-monetary reward currency is being redeemed and the amount of monetary currency being used in combination with non-monetary reward currency to make a purchase. More particularly, the present invention relates to determining payment and/or exchange values of goods and services offered as rewards in a loyalty, motivation or similar reward program comprising a plurality of dynamic combinations of non-monetary reward currency and monetary currency.
II. Background Information
To attract, retain and direct customers, employees and partners, an enterprise may provide a loyalty, motivation or similar reward program. In driving certain behavior, the program sponsoring enterprise distributes a non-monetary currency (e.g., points, miles or other) as an incentive to the program participants for achieving certain predefined objectives. The non-monetary currency distributed to the program participants as a reward can be redeemed by the program participants to purchase specific goods and services designated by the program sponsoring enterprise. For example, an airline's frequent flyer program provides non-monetary currency in the form of frequent flyer miles to customers participating in the frequent flyer program. The customer may redeem any accrued frequent flyer miles for free flights, upgrades or other rewards designated by the program sponsor. In some situations, customers may not have enough miles to redeem for a desired reward. For example, a customer may have enough accrued miles to redeem toward the purchase of a good or service, but the customer may not currently have accrued enough miles for the reward they desire the most. The conventional strategy is to statically limit the goods and services reward choices of a customer to the goods and services that their current mileage account balance may afford. This often causes problems because the conventional strategy does not permit a customer to self-determine any desired combination of a non-monetary currency and a monetary currency to redeem for a desired good or service.
In view of the foregoing, there is a need for methods and systems for determining payment values of goods and services more optimally. Furthermore, there is a need for customer determined payment values of goods and services comprising any combinations of non-monetary currency values and/or monetary currency values.
To finance the rewards, reward program sponsors back up their non-monetary currency (program liability). Therefore every program sponsor attributes a backup value per non-monetary currency unit issued (e.g., US $0.01). Such backup values per non-monetary currency unit vary heavily among programs and typically depend on an enterprise's cost structure and/or general margin as well as an industry's competitive environment. For example, airline frequent flyer programs offer free seats for flights or upgrades as rewards. For such free seats, airlines only back up the variable cost. Since the airline industry's cost structure generates high fixed and low variable cost, the cost of such free seats are minimal compared to other programs. For example, if the participant of a frequent flyer program redeems 20,000 miles to purchase a flight having an average retail value of $400, the variable cost to the frequent flyer program might be around $50. Due to the great value for both airlines and customers, frequent flyer programs world-wide have been very successful. However, it has also led to a world wide frequent flyer program mileage liability of over 14 trillion miles by the end of 2004, making frequent flyer miles the biggest currency in the world. As a consequence, airlines face pressure on free seat availability while customers face devaluation of their mileage currency. In some situations, airlines offer non-flight rewards (products or services) to provide their customers alternative rewards. However, such alternative rewards are usually low-value mileage redemption opportunities. For example, an airline may offer a box of chocolates for 20,000 miles as a non-flight reward to its frequent flyer program participants. While the cost to the frequent flyer program facilitator is $50 for both the box of chocolates or the flight, the retail value to a customer for these two rewards differs substantially. The retail value to the program participant for a flight is $400 as compared to the $55 retail value for the box of chocolates.
In view of the foregoing, there is a need for methods and systems for determining payment values of goods and services more optimally. Furthermore, there is a need for a reward currency system and method that provides an equivalent incentive for reward program participants to use the reward currency for the purchase of any items on the program sponsors list of goods and services. Such a system, if used in combination with an airline frequent flyer program would remove, for example, the disincentive from using the non-monetary currency for goods and services other than the purchase of airline flights.